Northwest Real Estate Forum

Floor area ratio – commonly referred to as FAR – is the ratio of a building’s floor area to the size of the parcel on which the building is situated. The higher the FAR the bigger the building. A maximum FAR limits the size of the building on a parcel and many jurisdictions, including the City of Portland, have maximum FAR standards that place limits on how large a FAR is allowed within different zones (see City Code 33.510.200).

Portland, however, like many jurisdictions, allows FAR beyond the maximum otherwise allowed by transferring FAR from one parcel to another under certain circumstances. Generally, how this works is a parcel with a maximum FAR the owner doesn’t intend to use, can transfer the “excess FAR”, i.e., the difference between the amount of FAR the property owner intends to use, and the maximum that otherwise is allowed on the owner’s parcel, to another parcel. The receiving parcel would then be able to “add” this additional FAR to the otherwise maximum FAR allowed on the receiving parcel and develop a bigger building. A bigger building generally brings more value to the “receiving” parcel and the “donating” parcel will likely expect some consideration for the transfer of the excess FAR, as the “donating” parcel will enter into a covenant that runs with the land that restricts development on the donating parcel to a FAR less than the maximum otherwise allowed.

The West Park Avenue (“WPA”) Parcel, commonly known as the hole in the ground west of Nordstrom in downtown Portland, was the recipient of excess FAR. In 2010, Fox Tower, LLC (“Fox Tower”) the owner of property next to the WPA Parcel and including a parcel now known as Director Park, transferred FAR that would otherwise be available to the Director Park Parcel to the WPA Parcel. The transferred FAR was the difference between the maximum FAR the City Code would allow on the Director Park Parcel and the amount of FAR that was actually being used for the development of Director Park. The Park is basically hardscape with little building development, so there was a significant amount of excess FAR that was not used. By adding the amount of excess FAR from the Director Park Parcel to the base FAR for the WPA Parcel, the WPA Parcel was able to achieve 354,000 square feet of floor area, i.e., a building significantly larger then would otherwise have been allowed on the WPA Parcel.

But the City Code in addition to allowing transfer of FAR from one parcel to another also allows “bonus floor area options” (City Code 33.510.210 C.), i.e., a parcel can have “Bonus FAR” if it does certain things including providing a “water feature or public fountains.” Director Park has a water feature. The City Code also allows additional FAR when a parcel provides bicycle parking and locker rooms, i.e., a “locker room bonus option” (to encourage bicycling). The Director Park Parcel did not have any bicycle parking and locker rooms, however, Fox Tower, the previous owner of the Director Park Parcel had reserved an easement on the Director Park Parcel for underground parking. That easement would allow for the construction of bicycle parking and locker rooms – creating additional FAR opportunity for the Director Park Parcel.

Clearly, the Director Park Parcel did not need additional FAR, although the WPA Parcel could use more FAR and the Director Park Parcel had those “bonus floor area options”. By now the Director Park Parcel was owned by the City of Portland. In order for the WPA Parcel to obtain the benefit of the “bonus floor area options” in May of this year, the three parcel owners – WPA, City of Portland and Fox Tower – entered into an amendment (the “Bonus FAR Amendment”) to the 2010 Agreement that transferred the excess FAR from the Director Park Parcel to the WPA Parcel. The Bonus FAR Amendment resulted in the City transferring the Bonus FAR available to the Director Park Parcel because of the water fountain to the WPA Parcel. This “Water Feature Bonus FAR” qualified the WPA Parcel to get an additional 10,000 square feet of FAR. The Bicycle Parking and Locker Room Bonus FAR, Fox Tower, owner of the subsurface easement on the Director Park Parcel agreed to allow WPA to construct bicycle parking and locker rooms within the easement resulting in a Bonus FAR of an additional 50,000 square feet for the Director Park Parcel, which the City as the owner of the Director Park Parcel transferred to the WPA Parcel.

As mentioned above, additional FAR has value and consideration, which is typically paid by the receiving parcel for the additional FAR. The WPA Parcel was receiving a significant increase in FAR from the Director Park Parcel and in return, although Fox Tower did not get any of the Bonus FAR, Fox Tower agreed to pay the City $100,000 to be used in maintaining and improving Director Park (Fox Tower and WPA are related entities- with the President of each entity being the same person).

But that is not the only consideration that was provided under the parties “Bonus FAR Amendment” as this Amendment provides if WPA elected to contract for security and janitorial services at its building that it would only contract “with contractors whose employees that directly perform security and janitorial services …. are represented in collective bargaining by a labor union” and “if the WPA employs persons directly to perform such work, WPA shall remain neutral during any union organizing campaign directed at security and janitorial employees …. and shall recognize the union as the representative of such employees upon a showing of majority status by the union through cards signed by such employees authorizing union representation.”

As stated above FAR has value and it is common when FAR is conveyed from one parcel to another that consideration is paid. In this case the City as the owner of the donating parcel is receiving consideration in the form of $100,000 to maintain Director Park. The other consideration granted was the above obligation of the WPA owner to use union labor. An obvious question is “why” was this included in the Bonus FAR Amendment? Was this an effort to obtain some assurance that those affected employees might receive a livable wage? Another question is “how” did this consideration end up in the Bonus FAR Amendment? Was it proposed by the City? The answers to these questions are not known, but there is an answer to “who” is benefitted by this consideration. The “who” is organized labor.

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